Equity markets were mostly weaker over the shortened week with higher than expected US inflation, increased covid restrictions in China, and the ongoing war in Ukraine affecting investor sentiment. The Aussie equity market wasn’t listening, finishing slightly higher.
Government bond yields rose strongly yet again on stronger than expected US inflation data before settling back down as investors saw value with US 10 year yields nearing 3% and Aussie 10 year yields moving above 3%.
US quarterly corporate earnings season kicked off this week with the impacts of inflation on rising costs likely to be a focus. Analysts expect that earnings from the largest 500 companies rose 4.5% in the quarter compared with a year earlier.
In local stock news, BHP confirmed that their shareholders will receive one Woodside share for every 5.534 BHP shares after the sale of their oil & gas assets is approved. The in-specie dividend would be US$4.62 per share.
Miners IGO and Western Areas have agreed the former will raise its offer for all shares to $1.24 billion, or $3.87 per share. IGO initially offered $3.36 per share. The Western Areas board has recommended shareholders accept the offer.
The Pendal board has determined the recent takeover offer from Perpetual is not in the best interests of shareholders. Perpetual’s share price fall following their announced takeover meant that the cash and shares deal valued Pendal at $5.97 per share. That was never going to get it done.
Markets software vendor Iress will no longer part with its UK mortgages business after the company said opportunities were explored but retaining the business was deemed best. The company will continue to invest in the UK mortgages business.
The gold price moved higher nearing US$2,000 per ounce as US headline inflation continued to rise coming in above expectations.
The oil price fell earlier in the week on demand concerns given increased lockdown restrictions in China, before rising above US$100 a barrel on more potential sanctions on Russian supply.
The Reserve Bank of Australia’s April Financial Stability Review notes that the Australian financial system is robust and that mortgage holders can cope with higher interest rates. However, the impact on spending and on sentiment with higher rates continues to suggest a shallow rate hike cycle is likely.
Australian consumer sentiment fell by 0.9% in April, falling to a level where pessimists outweigh optimists. Expected interest rate hikes, cost of living pressures, and bad weather led to the falls. In contrast, business conditions and confidence rose sharply in March.
The annual headline inflation rate in the US accelerated to 8.5% in March, the highest since December 1981. This compares with February’s 7.9% inflation print, with March’s print coming in slightly above market forecasts. Rising energy and housing costs were the main cause. Excluding volatile items, inflation rose 6.5%, slightly below forecasts.
Rising US inflation and mortgage rates is already having an effect on the homebuilder activity with demand in the housing market cooling significantly. 30 year fixed rate mortgage rates have surged above 5% leading to a 40% decline in mortgage applications on the same time last year.
Chinese Premier Li Keqiang issued a 3rd warning about economic growth in less than a week, indicating heightened concern about the outlook as widespread covid restrictions disrupt production and spending. Factories have been shut down further stressing global supply chains, whilst auto sales have slumped, and consumer prices have risen.
The federal election campaign got off to a rough start for Labor leader Anthony Albanese who struggled to recall both the current unemployment rate and the cash rate at a press conference.
The European Union agreed to ban coal imports from Russia, as part of a sanctions package which also includes a ban on most Russian trucks and ships entering the Union.
Current French President Macron will face Marine Le Pen in the final round of voting to take place on April 24, after they were the top 2 candidates according to last weekend’s initial ballot. Macron got 27% of the vote whilst Le Pen received 24%.
The US government ordered all non-emergency staff at its Shanghai consulate and their families to leave the Chinese city due to the lockdown measures imposed on the financial hub. The move comes after most of Shanghai’s 25 million residents were subject to severe lockdown keeping them in their homes. The order came days after the US government told Americans to reconsider travel to China due to what it calls an “arbitrary enforcement” of virus restrictions.
The US is said to be preparing a military assistance package of roughly US$750 million for Ukraine. The US has already provided them more than US$2.4 billion in military assistance since President Biden took office.